Despite its best efforts, the human brain still has trouble predicting the future. 2016 was a particularly disappointing year for the cerebellum, as it not only miscalculated the U.S. presidential election results but also underestimated the popularity of a disfigured movie superhero.

But the human spirit does not despair easily. It continues to undertake new (and old) challenges despite their apparent futility. Consider the art of prognostication, a practice virtually as old as time itself. Enormous amounts of gray matter have engaged in this ritual, with some of the most admirable attempts coming from royalty, inventors and politicians. In late 1944, for instance, British Prime Minister Winston Churchill predicted “victory in Europe” the following year, proclaiming, “Before many months have passed, the evil gang that has long dominated that unhappy continent will be wiped out.” As if on cue, the Axis surrendered just months later in Europe and elsewhere by the end of 1945.

In keeping with tradition, Medical Product Outsourcing turned to various medical device industry experts for their thoughts/forecasts for the new year and their reflections on 2016. Analysts included John Babitt, EY Americas medtech leader and Arda Ural, EY partner in life sciences; and Mark Leahey, president and CEO of Washington, D.C.-based Medical Device Manufacturers Association (MDMA). Their predictions follow:

Michael Barbella: What was the most significant medtech news in 2016?John Babitt and Arda Ural: The outperformance of the medtech sector compared to both the overall markets and the biotech sector was a very significant development in 2016. This performance was driven by many factors, including the shareholder-friendly steps of stock buybacks and dividends taken by many companies. However, we believe it is also a strong signal of confidence by the market in the long-term prospects for medtech.

Mark Leahey: Surely the most significant news for the medical technology ecosystem in 2016 was the two-year suspension of the medical device tax. MDMA fought against this misguided policy when it was first proposed in 2009, and very few thought it was a fight worth engaging in. We remained committed and passionate about putting an end to the device tax, and we never let up educating policy makers to show them how harmful it was for innovation and patient care. Though it took six years of passionate advocacy by our members and countless other stakeholders, we were finally able to convince Congress to put a temporary end to the device tax for two years. Medical technology innovators have been able to invest these resources in countless ways such as increases in R&D, job creation, and more. Unfortunately, this is only a two-year delay and when MDMA surveyed its members, they noted that they were reluctant to do more with the additional resources due to the fact that this excise tax is scheduled to come back into effect in 2018. Countless projects that had been put on hold or were underfunded were initiated as a result of the device tax suspension, which will translate to more cures and therapies for patients throughout the world. This is why it is so important to make sure that this pernicious tax on innovation never returns.

Barbella: What will capture headlines in the medtech industry in 2017?Babitt and Ural: We see several likely developments taking place in the medtech sector during 2017 that will capture headlines.

The portfolio optimization taking place by many major players in the sector is likely to continue as companies divest assets where they don’t have the economies of scale to succeed. We expect the lion’s share of deals to be “bolt-on” transactions versus transformational mega-deals over $5 billion.

We expect another positive year with respect to FDA approvals, including both 510(k) clearances and PMAs, which will continue to help fuel innovation in the sector.

Likely increases in capital flows from Asia-Pacific provide exciting opportunities. The rise in precision diagnostics brings new prominence to the sector being at the forefront of healthcare innovation and cost-effective delivery models.

The maturation of recent digital business model experiments by companies focused on achieving new capabilities in data analytics, computational power and sensors enable the development of future products and services and help improve patient care. We expect to see companies rapidly scale up to these experiments but also look to “fail fast” in collaborations that are not working out.

The future of the medical device tax, originally part of the Affordable Care Act but suspended until at least 2017, will continue to be closely watched by the industry. The tax could potentially be implemented, revised, eliminated entirely, or potentially bundled with a larger tax reform designed to repatriate ex-U.S. cash. Any of these scenarios would, of course, have significant implications for the sector.

Leahey: While MDMA and others will remain laser-focused on repealing or keeping the device tax turned off in 2017, it will also be critical to reauthorize MDUFA [Medical Device User Fee Agreement] and shorten the lag between regulatory approval or clearance of medical devices and securing reimbursement.

The 2016 [U.S. presidential] election outcomes will determine much of the Congressional focus and priorities, but it is critical that we improve the innovation ecosystem for medical technology innovators.

We continue to see some improvements with the regulatory pathways for medical devices which were driven by provisions established in MDUFA III, but we have a long way to go. It is our hope that the milestones agreed to as a part of the MDUFA IV proposal build upon these improvements, and solidifies the United States’ role as the leader in providing life-saving and life-changing medical technologies.

Closely related to this, it is imperative that we shortened the time it is taking for medical technologies to be adequately reimbursed by private and public payers. Medical innovations do patients and providers no good if they aren’t covered by insurance or obtain fair reimbursement. 2017 will be a pivotal year for policy makers to provide solutions to the growing problems about properly valuing medical technologies, and we look forward to working with them and other stakeholders to improve the ecosystem.

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